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Will NDA bail out Andhra Pradesh, Telangana on loan waiver burden

Friday, 30 May 2014 - 5:25am IST | Agency: dna

Banks in Andhra Pradesh and the soon-to-be-Telangana are eagerly waiting for the new state governments to take charge as both, the Telugu Desam Party (TDP) and the Telangana Rashtra Samiti (TRS) came to power thanks to promises of waiving off farm loans; the new state of Telangana will officially be formed on June 2 after which the two parties will take charge.

Banks estimate that the loan waiver amount for the two states will be to the tune of Rs 1,37,172 crore — perhaps the biggest ever in India. TDP returned to power in Andhra after a gap of 10 years on the promise of waiving loans worth ?87,612 crore taken by farmers and self-help groups. TRS too had promised to waive farmers' loans up to Rs 49,650 crore. The loans make up 29.09 % of the net bank credit of the states' banks against the RBI norm of 18%. However, both the state governments are likely to be bankrupt post the bifurcation, and will have to turn to the NDA government at the Centre.

"In view of the high expectations raised during elections, we (grameen banks, cooperatives and urban banks) are not able to collect a single rupee of the huge farm loan burden," said CVR Rajendran, CMD of Andhra Bank and president of the State Level Bankers' Committee (SLBC).

Rajendran warned that without proper guidelines, the entire exercise of waiving off laons would be impossible and futile. "We want the governments to set yardsticks, time frame, loans of allied agricultural activities and so on," he said.

Banks are however pleased that thanks to the political parties' poll promises, the state governments will fully reimburse them, helping them to bring down their non-performing assets (NPAs). As of January 1, 2014, the percentage of NPAs to total loans outstanding under agriculture, MSE and SHG lending were 5.08 per cent, 5.36 per cent and 3.44 per cent, respectively, said a bank executive.

"In a way it is good for banks because they can recover complete dues," said Rajendran.

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